Federal funding changes are hurting N.B.
Recently I expressed concerns regarding changes to the Canadian Social and Health Transfers (CST and CHT) contained within the 2007 federal budget. Unfortunately, those were not the only inter-governmental transfers that left our province wanting. In fact, in announcing the transfer funding changes the government stated it was able to undertake these initiatives because it had solved the "fiscal imbalance".
During the First Ministers meeting on health care, in September of 2004, equalization-receiving provinces expressed the view that the level of funding from the federal government for health care could not be discussed without dealing with nagging questions around equalization. In response, the Martin government commissioned a panel to look into issues around equalization.
In the meantime, the government established two-year guarantees as an interim arrangement until the panel could report. This temporary arrangement suspended the equalization formula while the panel studied the issue, with the goal of refining the formula in the future.
Before the panel finished its work, the Martin government was defeated. The panel then gave its report to the Conservative government, who permanently changed the federal government's approach to equalization in a fashion that left poorer provinces, New Brunswick and Prince Edward Island in particular, less well-off than other provinces in Canada.
In retrospect, it may have been a mistake to open the question of the formula-based approach to equalization, as a way of dealing with the so-called "fiscal imbalance." However, the decision as to how to respond to the problem, to the provinces, particularly the province of Quebec, and to the report, was clearly an undertaking of the present administration. The Conservative government's new formula, which includes the fiscal capacity of all 10 provinces, with 50 per cent of resource revenues factored in, and with special arrangements for Newfoundland and Labrador and Nova Scotia, puts New Brunswick and Prince Edward Island at a distinct disadvantage among Canadian provinces.
The 2007 budget document, on page 116, demonstrates an increase in equalization between 2006-2007 and 2007-2008 of just over $2 billion in total. New Brunswick's share of that increase was $26 million, which is 1.2 per cent of the total. Specifically, New Brunswick's legislated payments of 2006-2007 were $1.451 billion. New Brunswick's 2007-2008 renewed equalization payments were $1.477 billion. Again, according to the Conservatives' 2007 budget document, by comparison, the increase from 2006-2007 to 2007-2008 in the province of Quebec was $1.621 billion, or 77.2 per cent of the total. Unfortunately, even this increase for Quebec will not be sustained into the future.
The context within which the equalization decision was made saw the government of Quebec highlighting the so-called "fiscal imbalance." Quebec Premier Jean Charest made it the principal issue leading up to a provincial election in Quebec on March 26, 2007. Further, the Bloc Quebecois Members of Parliament made a response to the "fiscal imbalance" a condition of their support for the minority federal government's first and second budgets. Given the host of options that were available to calculate equalization, given the political context and the ultimate outcome, even if it was done to address Quebec's concerns about inequities under the interim arrangements, it is clear that the final formula was designed to satisfy arguments around the "fiscal imbalance" emanating from, and to the satisfaction of, the government of Quebec and the Bloc Quebecois.
The province of New Brunswick was not a target in this exercise, merely an innocent bystander. However, the impact is the same, and the changes made to the equalization program serve New Brunswick and Prince Edward Island the least. Coupled with the changes to the Canada Social Transfer and the Canada Health Transfer, an argument could be made that the provinces of New Brunswick and Prince Edward Island suffered the most of all provinces.
Newfoundland and Labrador and Nova Scotia have the protection of the Atlantic Accord. The province of Quebec, and to a lesser extent Manitoba and Saskatchewan, benefit the most from the changes to equalization. Alberta and Ontario clearly gain the most from the changes to the CST and the CHT, and British Columbia has a growing population, so that a per-capita adjustment to equalization is less harmful there than to New Brunswick and Prince Edward Island.
As I stated on Feb. 22nd in a meeting with the Telegraph-Journal's editors and reporters, a variety of decisions related to inter-governmental transfers in Canada, taken for a variety of reasons, has had the unfortunate effect of putting New Brunswickers at a serious disadvantage compared to other Canadians.
Federal government spokespersons will say that New Brunswick is receiving more money, which is true, but it is beside the point given that the government was dealing with a $10 billion surplus in the 2007 budget. Increases were a certainty. The measure of fairness is simply how our increase compared with that in the rest of Canada. As the 2007 Conservative budget document demonstrates, through equalization on page 116, and to the Social and Health transfers on pages 359-361, the budget fails our province miserably.
These are the facts, and they will re-visit us each and every year, because they result from structural changes to the nature of inter-governmental transfers in Canada. Politics aside, it is critically important that New Brunswickers become aware of these changes as a matter of public policy, regardless of political party.
No federal government would seek to put any province at a serious disadvantage, but neither is any federal government incapable of inflicting such damage, even as an unintended consequence, when seeking other objectives.
Liberal MP Andy Scott has served federally as Canada's Solicitor General, Minister of Infrastructure and Minister of Indian and Northern Affairs. He represents the riding of Fredericton.
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